Aug. 20, 2003 – The federal Housing and Urban Development Department took over the V.I. Housing Authority on Wednesday, administratively and physically, with a designated receiver and a team of experts in everything from procurement to building rehabilitation on site on St. Thomas and St. Croix.
Donna Ayala, the designated receiver, "stands in place of" the Housing Authority's interim board of governors, HUD Assistant Secretary Michael Liu said in a telephone press conference on Wednesday afternoon. Her function is that of chief executive officer, he said.
The interim board was appointed by Gov. Charles W. Turnbull on Aug. 1 after he, with Senate authorization, dissolved the permanent board. The governor took the action in a bid to stave off HUD's threats to place the Housing Authority in receivership.
"As of now, the board no longer holds any authority over the Housing Authority. That power is invested in my designee, Donna Ayala," Liu, who heads HUD's Office of Public and Indian Housing, said on Wednesday.
While the action is not unprecedented, he said, neither is it a common occurrence. "Since 1985, there have been 17 takeovers out of 3,200 housing agencies nationwide," he said.
The initial HUD team sent into the territory on Wednesday includes experts in procurement, personnel, and accounting systems, Liu said, as well as engineers with modernization and rehabilitation construction experience. Their mission, he said, "is not to assess, but to implement needed changes."
"We look forward to working with residents … to turn this thing around, to put the Virgin Islands Housing Authority back on its feet," he said, "as well as to recoup dollars that may have been lost to wrong parties, to collect debts owed."
Asked whether HUD has evidence of any criminal wrongdoing, Liu said: "I'm not going to comment on that at this time."
Although HUD is concerned about $12 million in emergency loans that VIHA owes — and failed to make a payment toward in January — Liu said that overall, what HUD sees is "a problem not of money, but of accountability."
"At this point, that obligation is still owed," he said of the $12 million. But, he added, "much depends on other things that we find, and whether or not we can work to instill changes in the operation that will give us confidence to look at that obligation perhaps in a different way."
He noted that there are "significant debts owed to the Housing Authority by other entities" — notably, although he did not name it, by the V.I. government. "We are going to be as creative and vigilant as we can be to see that those obligations are met," he added.
Asked whether he anticipated any negative response to the receivership locally, Liu replied: "We have taken this action because negative impact was taking place without our intervention. The authority as far as we can see was slipping deeper and deeper into the red."
The interim board spent last week putting together its response to HUD's finding that VIHA was "in substantial default of its obligation to maintain complete and accurate financial records so as to permit the preparation of a timely and effective audit." Gloria Waterman, assistant to the governor on St. Croix and chair of the interim board, said on Monday that she was hopeful that federal officials would accept the board's explanation of VIHA's financial dealings and allow it to proceed with a recovery plan.
Proposing plans vs. fixing problems
A release issued by HUD on Wednesday morning announcing the federal takeover stated that the board's response "failed to indicate that the irregularities and deficiencies in the program which are the basis for the default have not been abated. As stated in our default letter: 'proposed remedial action plans are not [a] substitute for actually fixing longstanding deficiencies.' Therefore, the department has proceeded with the takeover of VIHA and has appointed a receiver."
At the press conference, Liu reiterated that the board's response "did not indicate that the problems have been fixed," but presented "future actions proposed." He said: "We needed to see that problems were actually fixed. You can't fix real problems with mere promises."
Liu declined to estimate how long the receivership might remain in effect. "It will last as long as it takes for us to feel confident that the operations are put back in good working order," with federal officials having a good handle on "assessing why the problems occurred and whether we can recoup some of those dollars," he said.
HUD's action was taken with VIHA directly, he said, with notification going to its board members and senior staff, not to Government House.
However, the receivership will require "interfacing with the executive and legislative branches" of the V.I. government "to provide a greater understanding of the program, the responsibilities of the commission that may come into place when we hand it back to the Virgin Islands," he said. And, he added, "All of that is going to take some time."
Liu declined to specify what Pat Knight, leader of the HUD Troubled Agency Recovery Center teams that were in the territory last week, had to report upon her return to Washington. But, he said, the information clearly pointed to ongoing problems "over the last two years," referring to 2001 and 2002. Calls for greater accountability "were not heeded," he said. "Nothing has been changed."
He also declined to say what role, if any, former VIHA executive director Ray Fonseca might have in the receivership. Fonseca, who was named to the post last October, six months after Conrad "Ricky" Francois resigned unexpectedly, instituted unprecedented cost-cutting moves, including firing top-level managers and dismantling the Housing Authority Police, citing anticipated reductions in HUD money. The permanent board fired him at its last meeting, the day after the Legislature approved Turnbull's request for authorization to dissolve the body.
Business as usual, for now
No immediate job cuts are anticipated at VIHA, Liu said. "It will be a few weeks before we can make any type of adjustment to the scope of the Housing Authority," in terms of either administration or services, he said.
Any member of the interim board "that wishes to be constructive … will be welcome to address and comment to Ms. Ayala," he said. But the board itself "has no jurisdiction over the authority at this time."
For public housing residents, he said, it will be "business as usual," with no changes in unit assignments or rents. But "that's not to say that changes won't be in the offing as we assess what needs to be done … to provide the best and most responsive services to the residents," he added.
He predicted that Housing Authority staff and housing residents "will be very confident that if they are doing their job, and if they are adding value" to what it takes to turn the Housing Authority around, there "should be no problem." He said it's his understanding that "a good number of the residents are look forward to" the receivership.
According to Liu, HUD most recently placed the New Orleans housing authority in receivership, and did the same with the agency in Sanford, Florida, "a couple of weeks ago." He also cited a takeover in the Clinton administration of the agency in Camden, New Jersey. In some cases, he said, takeovers have been carried out administratively by HUD, and in others they have been accomplished "through the courts."
Ayala has 12 years of experience with HUD's Office of Public and Indian Housing. She most recently was director of public housing for HUD's New England Region, w
hich comprises Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. Prior to that, she held positions in Jacksonville, Florida; Boston; and Providence, Rhode Island. She had experience in construction and housing development prior to joining HUD as a housing management specialist.
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